According to Ken Rosenthal:

The Reds have re-signed catcher Ramon Hernandez to a one-year contract, according to a major-league source.

The deal also includes a vesting option for 2011 that will become guaranteed if Hernandez appears in 120 games next season.
The Reds had declined an $8.5 million option on Hernandez and bought out his contract for $1 million.

Hernandez, 33, hit .258 with five home runs and 37 RBI in 287 at-bats last season, his first with the Reds. He missed nearly two months after undergoing surgery on his left knee on July 20, appearing in only 81 games.

The knee injury also had hampered him earlier in the season, but Hernandez is expected to be 100-percent by spring training.

Hernandez, an 11-year veteran, has a career batting average/on-base/slugging line of .262/.327/.417.

Make of that what you will.

Updated: Again from Fox Sports

The Reds have re-signed catcher Ramon Hernandez to a one-year, $3 million contract, according to a major-league source.

The deal also includes a $3.25 million vesting option for 2011 that will become guaranteed if Hernandez appears in 120 games next season.

So, if he plays 120 games next year, the Reds are on the hook for $6.25M/2 years.